MAGI is the income figure Medicare uses to set what you pay for premiums and out-of-pocket costs

MAGI stands for Modified Adjusted Gross Income. It is the number Medicare uses to decide how much you pay each month for Part B (doctor visits) and Part D (prescription drugs), and whether you pay an extra surcharge called Income-Related Monthly Adjustment Amount (IRMAA). The higher your MAGI, the higher your premiums. The lower your MAGI, the lower your premiums.

Medicare calculates MAGI differently than the IRS does for taxes. For Medicare, MAGI is your Adjusted Gross Income (AGI) from your tax return plus any tax-exempt interest income you received — usually interest from municipal bonds. That is the only addition. Medicare does not count Social Security benefits as income for this calculation, even though you have to report them on your tax return.

MAGI matters because it directly affects your wallet. If your MAGI crosses certain thresholds, your Part B and Part D premiums jump. A single person with MAGI over $97,000 in 2024 pays more than someone with MAGI under $97,000. The jumps get steeper as income rises. If you are married filing jointly, the thresholds are higher, but the same principle applies.

Key Takeaways

  • MAGI is your tax return AGI plus any tax-exempt interest, and Medicare uses it to set your Part B and Part D premiums.
  • Social Security benefits do not count toward MAGI for Medicare purposes, even though you report them on your tax return.
  • If your MAGI exceeds Medicare's income thresholds, you pay IRMAA — an extra monthly surcharge on top of your regular premiums.
  • Medicare uses your tax return from two years ago to set your current premiums, so a drop in income this year may not lower your premiums until next year.
  • You can request that Medicare recalculate your MAGI if your income dropped due to retirement, job loss, or death of a spouse.

How Medicare calculates your MAGI

Start with your Adjusted Gross Income (AGI) from your most recent federal tax return. This is the number on line 11 of Form 1040 (or the equivalent on your return). Then add back any tax-exempt interest income you received during that year — this is usually reported on Form 1040, line 8b, and includes interest from municipal bonds and certain other tax-exempt securities.

That sum is your MAGI for Medicare. It is not the same as your AGI for tax purposes, because the IRS allows you to deduct tax-exempt interest from your taxable income, but Medicare adds it back in. This is one of the most common sources of confusion: a person who thinks their income is low because they have tax-exempt interest may find their Medicare premiums are higher than expected.

Medicare uses your tax return from two years prior to set your premiums for the current year. So in 2024, Medicare is using your 2022 tax return. This lag means a major drop in income — retirement, job loss, or a spouse's death — does not lower your premiums until the following year. You can request an exception if your circumstances changed significantly.

Income thresholds and IRMAA surcharges

Medicare sets income thresholds each year. If your MAGI stays below the threshold for your filing status, you pay the standard Part B and Part D premiums. If your MAGI exceeds the threshold, you pay the standard premium plus IRMAA.

The thresholds and surcharge amounts change annually. For 2024, a single person with MAGI between $97,000 and $121,999 pays one level of IRMAA; between $122,000 and $146,999 pays a higher level; and so on. A married couple filing jointly has higher thresholds but faces the same tiered structure. The surcharge can add $70 to $560 or more per month to your Part B premium alone, depending on your income level.

Part D premiums follow the same income-based structure. Your Part D plan's base premium plus the IRMAA surcharge determines your total monthly cost. Some people find that a small increase in MAGI pushes them into a new surcharge tier, making a significant difference in their annual costs.

What counts and what does not count toward MAGI

Your MAGI includes wages, self-employment income, interest, dividends, capital gains, rental income, and retirement account withdrawals (including IRA and 401(k) distributions). It also includes tax-exempt interest, which is the key addition Medicare makes that the IRS does not.

Social Security benefits do not count toward MAGI for Medicare premium purposes. This is a major exception. Even if you receive $50,000 per year in Social Security, that amount does not appear in your MAGI calculation. Supplemental Security Income (SSI) also does not count. Some other income sources — such as veterans benefits, workers' compensation, and certain disability payments — also do not count.

Roth conversion income counts. If you convert a traditional IRA to a Roth IRA, the amount you convert is added to your AGI and therefore to your MAGI, even though you do not owe income tax on the conversion itself. This is a common surprise for people planning retirement withdrawals.

How to find your MAGI on your tax return

Locate your most recent federal tax return — the one Medicare will use is from two years ago. Find Form 1040, the main return form. Look at line 11, which is labeled "Adjusted Gross Income" or "AGI". Write down that number.

Next, check line 8b on the same form, labeled "Tax-exempt interest". If this line has a number, add it to your AGI. The result is your MAGI for Medicare purposes.

If you filed a different form — such as Form 1040-SR for seniors, or a simplified return — the line numbers may differ slightly, but the concept is the same: AGI plus tax-exempt interest. If you are unsure which return you filed or where to find these lines, you can contact the IRS at 1-800-829-1040 or visit irs.gov and search for "Form 1040 instructions".

Requesting a recalculation if your income dropped

If your income fell significantly since the tax return Medicare is using — because you retired, lost a job, or experienced another major life change — you can ask Medicare to recalculate your MAGI and lower your premiums when ready, rather than waiting until the next year.

You must file a form called the Life-Changing Event Report with Social Security. The form asks you to describe what happened and provide documentation: a termination letter from your employer, a retirement notice, a death certificate if your spouse died, or a tax return projection showing your expected income for the current year. Social Security will review your request and notify you of the decision.

You have until December 31 of the year following the year your income dropped to file this request. So if your income fell in 2024, you can file the report through December 31, 2025. The sooner you file, the sooner your premiums may be adjusted.

Planning ahead to manage MAGI and premiums

Some people in their early 60s or late 50s who are approaching Medicare age consider the timing of large income events — such as selling a business, taking a lump-sum pension, or converting an IRA — because these can spike MAGI and trigger IRMAA for several years. The two-year lag means a large income event in one year affects premiums two years later.

If you are self-employed, you have some control over when you recognize income. If you are considering a Roth conversion, the amount and timing affect your MAGI. If you have tax-exempt interest income, it counts toward MAGI even though it is not taxable. These are not reasons to avoid these strategies, but they are reasons to understand the Medicare cost before you act.

Working with a tax professional or financial planner who understands Medicare rules can help you see the full picture. Some strategies that lower your tax bill may raise your Medicare premiums, or vice versa. Knowing your MAGI and how it affects your premiums lets you make that trade-off intentionally.

Frequently Asked Questions

Does Social Security count toward MAGI for Medicare?

No. Social Security benefits do not count toward MAGI for Medicare premium purposes. You report them on your tax return, but Medicare does not include them in the calculation. This is one of the few income sources Medicare excludes.

What if I have tax-exempt interest but no other income?

Tax-exempt interest still counts toward MAGI. If you have $30,000 in tax-exempt interest and no other income, your MAGI is $30,000 for Medicare purposes, even though you owe no federal income tax. This can push you into a higher IRMAA tier.

Can I lower my MAGI by taking less income this year?

Not for your current Medicare premiums. Medicare uses your tax return from two years ago, so income you take this year does not affect this year's premiums. However, it will lower your premiums two years from now. If your income dropped this year, you can request an when ready recalculation.

What happens if I disagree with Medicare's MAGI calculation?

Contact Social Security at 1-800-772-1213 and ask them to review your MAGI. Bring a copy of your tax return. If you believe an error was made, Social Security can correct it. If you disagree with how Medicare applied the rules, you can file an appeal through the Social Security Administration.

Do I have to report changes in income to Medicare?

You do not have to report routine income changes. Medicare automatically uses your tax return from two years ago. However, if you experience a major life change — retirement, job loss, death of a spouse — you should file a Life-Changing Event Report with Social Security so they can recalculate your premiums sooner.